This blog is all about economic and financial events happening in Mongolia.

Sunday, May 18, 2014

In risky tradeoff, China cuts smog but raises carbon output

Hexigten Qi, China — The new coal plant here is an industrial fortress of boilers, tanks and towers that stretches across a lonely plateau in Inner Mongolia. All day long and through the night, it vents huge gray clouds of steam and emits an awful stench.

Though it may seem odd, this is part of China's campaign to combat the nation's notorious urban smog. The plant transforms low-grade coal into a cleaner-burning methane gas that can be piped to cities, replacing dirtier fuels that now are used to cook meals, heat homes and produce electricity.

The Chinese leadership has called for the accelerated development of these coal-to-gas plants, and more are under construction in areas distant from major urban centers.

But embracing this technology to fight air pollution involves a serious environmental trade-off. The plants that produce this gas spew far more carbon emissions than those that burn coal to generate electricity.

"China — and the world — will bear the consequences for decades," said Robert Jackson, professor of environment and energy at Stanford University.

A study published last year in Energy Policy found that producing, transporting and combusting this coal-generated gas results in up to 82% more carbon emissions than burning China's coal directly to generate electricity.

If all the plants with initial government approval are built, they could boost the nation's annual carbon emissions by more than 7% over 2012 levels, according to an analysis prepared for The Seattle Times by a co-author of that study.

Such large-scale development would be a significant blow to global efforts to curb CO2 emissions, which already are changing the planet's climate and causing the oceans to become more acidic.

The success of those efforts is heavily dependent on China making cuts in its carbon emissions.

But the gas plants are part of a broader expansion of the Chinese coal industry in Inner Mongolia and other provinces in the north and west.

That development includes large electrical power plants, as well as refineries that turn coal into chemicals. These plants could help keep China's total coal consumption steady — or edging higher — even as the government cracks down on coal use in 12 populous provinces, and as it dramatically expands reliance on zero carbon fuels such as nuclear energy, hydroelectric, wind and solar.

Chinese government officials acknowledge that carbon emissions are a serious long-term threat to the nation. Rising sea levels later in the century would threaten coastal cities, and water shortages would intensify, according to a Chinese government report.

But dirty air is the front-burner environmental issue in China.

Air pollution is cutting an average of more than five years from the life expectancy of some 500 million northern Chinese people, according to an analysis published last year in The Proceedings of the U.S. National Academy of Sciences.

In Beijing, even on clear, blue-sky days, many residents don face masks to protect against soot particles. The China Daily newspaper chronicles the plight of pollution refugees who flee Beijing in search of cleaner air.

"We will declare war against pollution and fight it with the same determination we battled poverty," announced Li Keqiang, China's prime minister, in a speech this year to the National People's Congress. Wary of dependency

Much of the urban smog in China comes from using coal to cook meals, heat homes, generate electricity and power industry. By contrast, methane — the prime component of natural gas — burns much cleaner than coal, helping to reduce smog and improve indoor-air quality fouled by coal-fired stoves.

But China's petroleum companies can't meet the demand for methane from traditional gas fields and lag far behind their U.S. counterparts in developing new reserves through fracking.

While China buys increasing amounts of gas from other nations, the government is wary of becoming too dependent on imports.

So China's leaders have embraced coal-to-gas plants as part of the nation's energy future.

Last September, facing a growing public outcry to ease smog, China's State Council announced development of the coal-to-gas industry would be sped up over the next decade. At least 18 plants have obtained initial approval from Chinese officials for construction, according to the World Resources Institute.

Developers are seeking to build several dozen additional plants.

It is uncertain how many will come on line, given the growing concerns about the massive carbon load and water demands that would result from so many new plants.

"A lot of people in the (Chinese) policy community oppose this," said William Chandler, research director of the U.S.-based Energy Transition Research Institute. "And they say that the decision (to expand the coal-to-gas industry) is not a done deal."

But these plants have powerful support from the coal industry, which has been stung by China's economic slowdown and plunging prices. The plants also are promoted by regional governments, which often are involved in lucrative land-development deals and are eager to develop new jobs. $4 billion investment

Before the advent of electricity, there was a long history, both in China and the West, of turning coal into a crude "town gas" to light street lamps.

But turning coal into a more refined methane gas is a more complicated process. To produce the methane at Hexigten Qi plant, the coal is fed into large pressurized vessels where it is combined with steam. The resulting gas then is sent through a series of purifying columns.

The Hexigten Qi plant is operated by Datang International, a state-owned power company that is investing more than $4 billion to bring it into full production. Datang's plant is one of two such facilities that opened in the last year.

The first phase of the plant began operating in December. It quickly shut down in January and did not start up again until this spring because of corrosion problems, according to Chinese news reports.

Datang officials did not respond to repeated requests from The Seattle Times for comment.

At full capacity, the plant is supposed to produce some 4 billion cubic meters of natural gas annually, according to Datang documents. That's equal to more than 40% of all the natural gas consumed in Beijing in 2012.

Workers on the Datang payroll are housed in new dormitories on a campus just inside the front gate. Meals are served by white-hatted chefs, and a recreational center offers badminton and pingpong.

The plant is forecast to eventually provide some 1,500 jobs.

Shang, a 49-year-old coal miner, found temporary work at the plant as a janitor. He pronounced his job "fabulous," with wages and living conditions far better than anything he had ever experienced.

But these jobs carry risks. In case of toxic leaks, Datang has built an evacuation center for workers. In January, shortly after the plant opened, industrial "poisonings" killed two and hospitalized four others, according to Xinhua Inner Channel, a Chinese news service.

In the months ahead, Datang's troubled start-up will be monitored by Chinese government officials eager to learn more about the technology and economics of turning coal into gas.

China's environmentalists still hope the government will back away from green-lighting an industry that emits so much carbon.

The coal industry, however, is eager for new markets. Last year, the Datang plant began buying coal from a mine at the edge of Xilinhot that was struggling with the first downturn in sales in a decade.

Despite pollution, carbon emissions and climate change, Cheng Xiaoliang, the mine's vice general engineer, is confident about the future.

"I firmly believe that coal is going be the main generating source of energy at least for the next 50 years," he said. "No matter what, China still needs coal."

Coming Monday: China's massive coal industry devouring water supply.

About this series

This series was supported by a Perry and Alicia O'Brien Fellowship at Marquette University. The fellowship enabled reporter Hal Bernton to spend the academic year at Marquette reporting this project, and working with students from the Diederich College of Communication. Graduate student Zhu Ye contributed to this report.